The IRS Has Just Made Obamacare’s Individual Mandate Optional
Policy + Politics

The IRS Has Just Made Obamacare’s Individual Mandate Optional


When President Trump signed an executive order shortly after taking office designed to weaken the Affordable Care Act, some questioned whether the instructions to federal agencies to look for ways to ease the law’s burden on businesses and individuals would have any real bite. 

But on Tuesday, there can be little doubt Trump is succeeding in hastening the demise of a program that currently insures more than 9 million Americans. That’s because the Internal Revenue Service responded by weakening the health care law’s requirement that individuals either acquire health insurance or pay the penalty.

Related: There’s Less to Trump’s Obamacare Executive Order Than Some Suggest 

The “individual mandate” to purchase health insurance or pay the penalty is the bedrock of the 2010 Affordable Care Act because it forces younger, healthier Americans who might otherwise gamble and go without coverage to join the Obamacare risk pool and help offset insurers’ costs in providing coverage to older, sicker people. That requirement – seen by Republicans as an kind of pyramid scheme and intrusion on personal liberty – has been enforced by the IRS, until now. 

Since the formal launching of the health care program in 2014, taxpayers have been given the option of checking a box on line 61 of their 1040 federal tax returns declaring whether or not they or members of their family have qualified health insurance -- and providing documentation to prove it. Even with this voluntary approach, the IRS collected individual mandate payments from 8.1 million tax returns in 2015 averaging $210 for a total of $1.7 billion, according to an analysis of IRS data by Investor’s Business Daily. 

For the coming 2016 tax season, the IRS planned for the first time to make it mandatory for taxpayers to check the box or face not having their tax returns processed and their tax returns withheld. In other words, the IRS decided to crack down on scofflaws. 

Related: Trump Era Begins with Moves Against Regulations, Obamacare 

But according to a report by the website, the IRS has abandoned this get-tough approach and will continue to grant taxpayers the discretion of checking the box to indicate whether they have health coverage or have paid the penalty to relieve them of that responsibility. 

 “The Trump Administration has the authority to go a lot further than this in weakening the individual mandate,” said Larry Levitt, vice president of the Kaiser Family Foundation. “But, this does send a signal that they're not going to enforce the mandate rigorously, and that’s not welcome news for insurers. Of course, Congress may make this all irrelevant by repealing the mandate entirely.” 

Obamacare, with a projected cost of $1.2 trillion over 10 years, has been beset by skyrocketing premiums, the collapse of more than 20 experimental non-profit co-ops and major financial losses by UnitedHealthcare, Aetna, Blue Cross-Blue Shield and others that have been driven out of some of the markets. 

The Trump administration pulled back about $4 million to $5 million radio and TV advertising by the Department of Health and Human Services to attract younger people to enroll in the 2017 insurance season. 

Related: Are Republicans Losing Momentum on Obamacare Repeal? 

After a relatively strong start, enrollment for Obamacare’s 2017 season began to sag after Trump took office Jan. 20 and stepped up his criticism of the program. Slightly more than 9.2 million eventually signed up for coverage in the 39 states that use the federal insurance marketplace, down from the more than 9.6 million who signed up last year. 

On Tuesday, Trump tweeted the news that Humana had become the first major insurer to announce it was dropping out of the Obamacare individual insurance market in 2018, citing it as another example of the failure of President Obama’s signature health care plan and the need “to repeal, replace & save healthcare for ALL Americans.”

The IRS said that technically, taxpayers are still legally required to have health insurance or pay the penalty – but the IRS has the discretion as to whether to enforce that requirement or not. But the latest move by the IRS has raised serious legal questions for some.

Related: The GOP’s Big Tax Dilemma: Repealing Obamacare Taxes

Michael Cannon, the health policy director at the libertarian Cato Institute, said in an interview that the Trump administration under the Constitution is required to enforce the mandate unless Congress decides to change the law.

Even while the Trump has broad discretion in implementing laws, “The president does not get to say, we are not enforcing that law over there, and therefore people don’t have to obey it, or winking at the law over there – it’s still the law,” Cannon said. “What the IRS is doing here is tacitly deciding not to enforce the law, and that’s not lawful, that’s unconstitutional,” he said.

However, Joseph Antos, a health care expert with the American Enterprise Institute, questioned whether the new IRS policy would have any profound impact on the fate of Obamacare. “I think it’s more of a political statement to Trump’s political base than a real change in effective policy,” he said in an interview.